BP Plc wrote off $770 million from its investment in an undersea gas block off India’s eastern coast, citing “uncertainty” about benefits flowing from the government’s gas pricing policy.
India will increase natural gas prices to $5.61 per million British thermal units from $4.2 starting Nov. 1, Indian Finance Minister Arun Jaitley said on Oct. 18. BP’s partner billionaire Mukesh Ambani’sReliance Industries Ltd. (RIL) won’t benefit from the higher gas price as the venture is locked in a dispute with the government over output from the KG-D6 block.
While the gas price will be revised every six months, the increase was lower than the $8.4 proposed by the Congress Party-led regime, which lost power in national polls in May.
“The charge arises as a result of uncertainty in the future long-term gas price outlook, following the introduction of a new formula for Indian gas prices,” Europe’s third-biggest oil company said in a statement Wednesday. “We expect further clarity on the new pricing policy and the premiums for future developments to emerge in due course.” Output from the KG-D6 block has slid since 2010 as the reserves have proved difficult to access. London-based BP, which reported a 19 percent drop in third-quarter profit today, had paid $7.2 billion in 2011 for a 30 percent stake in the KG-D6 and 20 other blocks operated by Reliance.
